Eric Henry, owner of TS Designs in Burlington, has been in business since the late 1970s. He has long-term employees, provides a living wage and assists with health insurance coverage, and has forged relationships with suppliers and customers that have taken years to cultivate.
Since the Covid-19 pandemic hit his community, Eric has struggled to keep his employees on the payroll as long as financially possible. In fact, Eric held off furloughing his employees until he was assured that they would be made whole by the state and federal unemployment insurance benefits that were announced by state officials.
With that, last Monday, he furloughed a significant part of his staff. He kept a skeletal crew to run an essential program for the military. Meanwhile, he applied for the loans offered in the CARES Act, including the Paycheck Protection Program (PPP) loan.
Unfortunately, nearly two weeks later, none of his furloughed employees have received any unemployment payments. Nor has his business or any of the businesses in his network received funding through any of CARES Act programs.
Small businesses were offered a lifeline after Congress passed the CARES Act allocating $350 billion in forgivable loans to help small businesses weather the pandemic with a particular focus on providing money to keep employees on the payrolls. But it’s had a rocky start making it hard for businesses to access the money. And it places too many limitations both in its time frame and how the money is allowed to be used.
Now as Congress negotiates another phase of the relief, we must let add our collective business voices be heard and tell Congress that they have to take specific steps to ensure that small businesses are getting the funding they need to survive and keep the nation’s economy moving forward.
For TS Designs and thousands of businesses across North Carolina, their future is in peril. With stay-at-home orders now affecting all of our state and most of the country, revenue has plummeted. Rightly small businesses are doing their part to flatten the curve of Covid-19 infections by closing businesses deemed non-essential or changing the way they do business to keep essential businesses open.
But small businesses and their employees need help urgently. According to the Small Business Administration, small businesses make up more than 99% of businesses in NC, and employ 1.6 million people, which make up 44% of the state's workforce. With small businesses numbering more than 800,000 in our state, the success of small businesses is directly tied to the success of our economy as a whole and will be crucial to getting the NC economy up and running after the quarantines end.
The North Carolina Business Council, advocating on behalf of small businesses across NC, demands that the federal government take action to make this program work as it was intended to help businesses now before it’s too late.
Based on our research and feedback from small businesses, we recommend the following actions be taken:
Make it Easier for Banks to Process Loan Applications:
Many businesses cannot even get through the first step: applying for the loan. We urge the Treasury Department to provide clearer guidelines for both banks and business owners. The Treasury should also make it clear that these loans are guaranteed by the federal government in order to alleviate banks’ concerns that they may be on the hook for these loans if they are defaulted on.
Without clear guidance, each bank has been enacting their own rules about who can apply for a loan – to the detriment of small businesses.
Most are lending to existing customers. And some define existing customers as those applicants with both a preexisting banking and borrowing relationships and are turning away customers who have an open line of credit with another bank. Some banks simply are not accepting applications leaving their small businesses customers in the lurch.
And for many business owners who bank with community banks, their loan applications are stalled as those banks wait for SBA accreditation.
Streamline the application process: Right now businesses are burdened with providing 12 months of payroll costs along with other documentation. We can simplify this by having each business present their most recent year’s tax return. This sets us up for the next step which is to expand how the money can be used.
Provide stimulus money, not loans: Businesses are under enough strain already. They don’t need the burden of thinking about repaying a loan. Although PPP loans are meant to be forgivable, stringent requirements must be met. Small businesses must spend 75% of the loan amount on payroll costs and the remaining 25% can only be spent on mortgage interest, rent, and utilities. This is a burden for both the business owners and the federal government. Businesses need more flexibility to spend the money where it is most needed to ensure their survival.
Expand the time frame: No one really knows how long this crisis will last. Right now North Carolina is looking at a stay-at-home order that lasts at least until the end of April. Most expect this will be extended. Because of this, these loans have too many time limitations. Businesses must apply by June 30th, and the loan funds are only projected to last for eight weeks. This must be extended to allow businesses to stay afloat and keep their employees on the payroll.
Approve more money: Both businesses and banks need reassurance that the money will not run out before it can do its job of saving our economy. Congress must approve more money to ensure the success of the program.
While Congress weighs adding an additional $250 billion to fund the Paycheck Protection Program, we ask that Congress and the current administration take steps to make sure this critical program works for small businesses and their employees. When this crisis is over, small businesses, their employees, and the critical goods and services they supply will help our state and country return to a healthy economy. We must act on behalf of small businesses now.